What happens to consumers when a bank fails and closes in Zimbabwe
It’s no secret that most if not all Zimbabweans have little to no trust in the banking sector in Zimbabwe and for good reason. Political instability, policy changes and currency volatility have been all major factors contributing to loss of trust in the banking system with all these issues greatly affecting our currency and economic landscape. Most people are skeptical of banking their because of these inconsistencies and loss of trust in the system. So what we are going to look at what exactly happens to customers when a bank closes in Zimbabwe for whatever reason and we will be looking at how previous failed banks were handled.
So let me take you back to times most of us would rather not remember: the 2008 crisis which hit the world, sinking multi-billion dollar companies. It was a time to forget, considering now when things are good, we are still having some issues now imagine a crisis that hit the world with some of the world’s biggest economies collapsing so what was actually happening to us?, one would only wonder the suffering , uncertainty and chaos that unfolded during these times.
As you might have guessed, pointing out the obvious here - a record number of companies went bankrupt and closed during that time sending an economy that was steadily growing into a downward spiral affecting thousands if not millions of lives. Company closures are not new and no company is too big to fail as we have seen, multi-dollar business crumble to nothing.
Usually when a company closes - shareholders, insurers, owners and other relevant parties lose money depending on the legal structure of the company, well that’s a story for another day on how companies are structured.
To address the elephant in the room, what really happens when bank fails and closes while you and I have bank accounts with money in the failed bank. If back in 2003 to 2009 you had some stake or savings in Interfin Bank, Allied Bank, Trust Bank and Afrasia Bank you might want to stick around till the end of this article because all is not lost.
Some of Zimbabwe's biggest banking institutions started failing from around 2003 for reasons we mentioned earlier, which frankly set the tone for the distrust people have in the banking. While there maybe be legitimate reasons to distrust the banking system, during this mass closure period, the government introduced policies to minimize risk and losses to depositors who by the way are very crucial in stabilizing the system. So to protect depositors in such events, the DPC was established under the Deposit Protection Corporation Act, which also created the Deposit Protection Fund. The DPC administers this fund and the Deposit Protection Scheme in Zimbabwe to provide a safety net for depositors.
Remember the 4 banks i mentioned earlier?, so after their closures the way back then, they were finally liquidated.
Bank liquidation involves permanently closing the institution, selling off its assets, and using the proceeds to settle outstanding liabilities as far as possible. Customer accounts are typically closed, with cheques sent to account holders for the insured deposit amounts. Last year the DPC carried out its duties as liquidator for five closed banks by recovering assets and distributing liquidation dividends to creditors and uninsured depositors. Four liquidation assignments were concluded, with total recoveries-including cash, treasury bills, and properties-amounting to ZiG9.4 million. Just a side thought, let us know in the comments section, why does it take this long to liquidate a closed bank because during this whole time, some of the beneficiaries might have passed on with many failing to claim what they are owed. The DPC was a good move but the process should be faster because in my opinion that’s what gives the masses confidence and trust in the system.
Four banks that collapsed between 2003 and 2009 have been officially liquidated as confirmed by Hopewell Zinyau, Chief Executive Officer of the Deposit Protection Corporation (DPC), announcing at the corporation's annual general meeting (AGM) last week that the residual assets of Afrasia, Interfin, Allied Bank, and Trust Bank were formally handed over to their shareholders following liquidation, which raised ZiG9.4 million. These funds will be used to compensate affected depositors.
As quoted at last week's AGM, the DPC CEO also highlighted an increase in the Deposit Protection Fund's size, which is used to compensate depositors and bankers incase a bank fails and closes. This fund now stands at almost US$17 million as of March 31, 2025-a nearly 10% rise from US$15 million at the end of 2024, and more than double the almost US$ 7.8 million recorded at the end of 2023. This growth is seen as a positive step towards restoring confidence in Zimbabwe's financial sector.
So if you had any deposits in the aforementioned banks here is what you will be inline to receive as compensation. As it stands the DPC offers deposit protection of up to US$1,000 per deposit class for contributory banking institutions and US$500 per deposit class for deposit-taking microfinance institutions. However, due to ongoing economic challenges, especially exchange rate volatility, the DPC is considering raising these coverage limits. Funding for the DPC comes from premium levies, rental income, and investment returns. Dividends paid to creditors of the five failed banks under liquidation increased by 25% from ZiG90,400 in December 2023 to ZiG113,500 in December 2024.
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After much turmoil in the aftermath of bank closures, The establishment of a depositor compensation scheme was a no brainer in order to restore public confidence in the banking system. While this helped back then, the slowness in these liquidation procedures does little to calm the nerves of the masses not to mention the lack of public knowledge on the DPC. The DPC is not well publicized and lot’s of people actually don’t know about it. Challenges also remain in related sectors. The Insurance and Pensions Commission of Zimbabwe (Ipec) continues to grapple with compensating pensioners who lost funds during the hyperinflation crisis of 2008. Ipec reiterated that progress had been made, but campaigners argue that the redress process has been too slow, leaving pensioners vulnerable amid ongoing economic hardships and as mention earlier some might actually pass away without receiving their compensation making the whole process counterintuitive.
While further assuring the masses DPC CEO Mr Zinyau noted that, at current cover levels, over 99% of depositors in contributory banking institutions and deposit-taking microfinance institutions are fully covered while it was also stated at the AGM that the program covers 96% of individual accounts up to the insured limits, including through continuity banking arrangements.
Gaining back the trust of the public is a steep climb but a very important piece of the puzzle in stabilizing our ever rising inflation. The DPC should have more coverage so that consumers know that something is being done to ensure they are minimum to no losses in case of bank failures. Please share this article, it might help someone.
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